is MLS overpriced?

Question

I found my last deal through my agents MLS list.  We negotiated down quite a bit and got the refi on the house at higher value 6 months later.  In the next year I am looking to find my next deal and I am not too confident I can replicate a good deal from the MLS.  Is the MLS too saturated?  What is best way to utilize my agent and also look for deals elsewhere?  I don't think my agent will want to put in too many low price deals to justify a good deal on the MLS.  I wouldn't if I were him or her.  How should I utilize my agent on the next deal?  Presently he is now turned into my friend and this could get awkward if I don't use him.

Darren Budahn · Answer

I can't speak to the market in So Cal, but in general, most MLS properties are overpriced from an investor perspective.

I would just be honest with your agent and let them know you will be looking for off market deals and are looking to pay below market for MLS properties.  They shouldn't have a problem with that.  In fact, they may have connections that help you find off market properties.  There's nothing wrong with submitting low ball offers as long as they are not ridiculous. Your agent should not have a problem with this as long as your offers are reasonable and you are considerate of their time.  Now, if you want to fire off multiple low ball offers to multiple properties all the time, then I would just get my RE license and do it myself.

Danny N. · Answer

@Jody Rouse

Great observation about MLS being pricey. As an agent myself, definitely know that once a property hits the MLS,The price inflates. I guess from a seller's perspective that is why its better to sell on the MLS as majority of residential properties do better.

With that said, It can be an extremely profitable strategy for those doing wholetail Flips. But in tight inventory markets like yours, its good to set up some type of off market search for discounted properties.

Roy N. · Answer

Precisely!  An agent who knows how to work with investors will understand her/his per-transaction commission will be lower, but there will be many of them ...  in contrast to Dick & Jane Retail who buy 1-3 houses in their lifetime.

Scott R. · Answer

I don't personally mind writing lots of lowball offers for my clients. Look at it like sending out mailings. Sure the response rate might be low, but the more you send out, the more likely you are to get a bite. I'm sure if he is your friend he will gladly write lots of lowballs for you. You already got him paid once doing that.

Taylor West · Answer

Rich Dad trainers and/or mentors will call MSL's 'retail' meaning, they are not investor friendly numbers.  So MAO offers are maximum, but not all sellers will accept the offer making wholesale successes far and few between, but sweet when a deal is found.

At the very least, if you make an offer with the owner/agent and no one else wants the property, you may just get that phone call when the owner has had enough.

Rhondalette W. · Answer

Hey Jody,

The way you can find out if there are deals on the MLS is run the numbers on houses that you are interested in. I recommend using the BiggerPockets calculator to figure out if there will be cash flow if you are planning to rent. Your realtor should also send you leased comps in the area and sold comps to help you determine whether or not the property in question is a good deal. If you do not think your realtor "friend" is willing to submit several low offer deals on your behalf you should find another realtor who will. I have been lucky enough to find a realtor who has shown probably about 100 houses over the year and have submitted at lease 20 or so offers. Sometimes I try to give her a break with a week or two with no showings but then she starts texting me asking me if I have seen certain new listings. Even when I get discouraged she tells me some new homes will come on market soon. If you really think there are no good deals on MLS. You could do some direct mail or find a wholesaler in your area. Happy house hunting...

Jody Rouse · Answer

Thank you @Jesse T. for the great advice.  As long as I am on the same page as my agent he will understand that he is here to match the house to the criteria of my investment.  Hopefully he is willing to get creative.

Jesse T. · Answer

One common technique for agents to generate leads is to contact the owners of expired listings.  I am sure these owners gets tons of call/emails etc.  I think you might be able to work out a win-win situation for properties where you might be interested.

If you give him the criteria you are looking for, ask him to run some of these properties by you if he has any that respond.  Generate a price range for your offer.  That way he can go back to them and say "I have a potential buyer willing to offer in the X to Y range, who might be interested in your property".  If your price is too low they have the option of doing a normal listing with him.

If this approach only ends up with him getting a ton of listings - he should give you a big discount on your commission.

Darren Budahn · Answer

@Jody Rouse

You are welcome. Most agents only work with retail buyers who are willing to pay retail because they fall in love with the house.  Having an investor mindset as agent is not very common.

Jody Rouse · Answer

@Darren Budahn  thank you for that great advice.  I think in the next few months I will have an honest chat with him over lunch.  He knows my goals but doesn't realize that you make the money on the BUY.  The BUY has to fit the investment and that may not mean the MLS.  Thank you again.

is MLS overpriced?

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